Five Things You Need to Know: Healthy & Well Contained to That Sweet Spot Somewhere Between Disaster & Denial; But Isn't All Real Estate Local?

What you need to know (and what it means)?

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Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. Between Disaster & Denial

Mixed numbers on the housing front this morning - by "mixed" we mean a "healthy" and "well-contained" assemblage of both "disastrous" and "not particularly good."

Housing Starts declined 2.1% in May, according to the Commerce Department - we'll call this the "not particularly good" part of the report.

Meanwhile, here's the "disastrous" part of the report: Building Permits rose an unexpected 3%.

Wait, how is an unexpected rise in Building Permits disastrous? Because it's all in the headline number, which might lead some to believe things are actually getting better in housing.

When we look inside the report we see that building permits in May for single-family homes are actually at the lowest level since July 1997.

As well, consider the comments from Hovnanian (HOV) CEO Ara Hovnanian on Bloomberg yesterday, saying the housing market is "quite sluggish" and that he expects it to remain "challenging," which leads us to today's Number Two...

The NAHB's Housing Market Index fell to 28 in June - the lowest level since February 1991, and below the median forecast for a reading of 30, the NAHB reported yesterday.

Both the readings for evaluations of current sales and evaluations of sales six-months out fell 2 points.

The index gauging traffic of prospective buyers fell one point.

"Builders continue to report serious impacts of tighter lending standards on current home sales as well as cancellations, and they continue to trim prices and offer a variety of nonprice incentives to work down sizable inventory positions," said NAHB President Brian Catalde, a home builder from El Segundo, California.

January 1995. Coming off the best year I have ever experienced at the racetrack, it's the start of a new season and I'm standing in front of a mutuel window at an OTB in Kentucky watching the second race at Gulfstream Park. I have saver win money on the 7 at 78-1 and exactas using the 7 with the favored 2 horse, backed up with the 3 and the 4.

The race unfolds exactly as I expect and the 2 nips the 7 at the wire. That's why the win bet was a "saver." But I have the exacta covered, and so I'm watching the board waiting for the payoffs.

"I am on fire," I think to myself. "I can't lose. Seriously, I can't lose. They're giving away money here. Giving it away." So I'm standing there in the OTB smiling to myself, draped in my special velvet invincibility cloak, taking in the sights of all the suckers and steady bad luckers tearing up tickets when the last thought I have before the payouts come back is this: "I've never had it so good." We'll come back to that thought momentarily.

The payoffs appear on the board - $5.60 for the winner, $56.40 to place for the second-place finisher. That suggests a fair exacta return of around $250. So I watch the board, waiting for the monitor to cycle around to the exacta return. It flashes up: $2 Exacta $78. What? I can't believe it. $78?! I'm furious. It's hard to cash exactas. And with the track takeout of 18% a player can't afford payoffs that come back even less than half-full. I'm cursing my luck - literally. I don't know it yet, but I am. As it turned out, that was the last ticket I cashed for the rest of the Gulfstream Park meet that year. Never had it so good? Indeed.

Anyway, I was reminded of that story this morning when reading a Bloomberg piece about former Federal Reserve Chairman Paul Volcker who this morning was speaking at Georgetown College in Georgetown, KY.

"The world economy, I think, in all of human history has never had it so good," Volcker said.

In other words, we can expect to not cash another ticket for the remainder of this meet.

4. Back toReality

Meanwhile, in reality, the fallout from a years-long surge in subprime lending is far from finished, declares USA Today in a story about the ongoing real estate reckoning.

The article cites some numbers that may be unfamiliar to USA Today readers not following real estate closely: - About 70% of subprime loans made in 2006 impose financial penalties on borrowers who repay or refinance early - 50% were made on stated, not documented income- Many included piggyback loans- Few required borrowers to put money in escrow for taxes or insurance, leaving many unprepared for thousands of dollars in bills.

The number of homes entering foreclosure is expected to top 1 million this year, with 60% of those being subprime mortgages, the article notes.

True, those foreclosures represent a fraction of the mortgage market - a mere 2%.

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